When linking a file by dragging and dropping it onto an edit window or the publications table, or by using the Choose File button in the edit window, AutoFile will try to automatically move the file to the Papers Folder if the "File Papers Automatically" preference is selected, as described in the AutoFile preference help topic.
Note however that the actual move can be delayed if not all the fields that are necessary to generate the new location are set. Which fields are necessary to generate the location depends on the format that is used for the file name (Local File format). This format can be set in the AutoFile Preferences.
Of course the file will never be automatically moved if you do not choose the "File Papers Automatically" option in the AutoFile Preferences.
When a file is automatically moved, a message will appear in the status bar of the Editor window, if that window is open and the status bar is shown.